Plaintiffs base their libel claim on the allegedly defamatory
statements contained in the Rumorville publication that
CompuServe carried as part of the Journalism Forum. CompuServe
argues that, based on the undisputed facts, it was a
distributor of Rumorville, as opposed to a publisher of the
Rumorville statements. CompuServe further contends that, as a
distributor of Rumorville, it cannot be held liable on the
libel claim because it neither knew nor had reason to know of
the allegedly defamatory statements. Plaintiffs, on the other
hand, argue that the Court should conclude that CompuServe is
a publisher of the statements and hold it to a higher standard
of liability.

Ordinarily, "`one who repeats or otherwise republishes
defamatory matter is subject to liability as if he had
originally published it.'" Cianci v. New Times Publishing Co.,
639 F.2d 54, 61 (2d Cir. 1980) (Friendly, J.) (quoting
Restatement (Second) of Torts § 578 (1977)). With respect to
entities such as news vendors, book stores, and libraries,
however, "New York courts have long held that vendors and
distributors of defamatory publications are not liable if they
neither know nor have reason to know of the defamation." Lerman
v. Chuckleberry Publishing, Inc., 521 F. Supp. 228, 235
(S.D.N.Y. 1981); accord Macaluso v. Mondadori Publishing Co.,
527 F. Supp. 1017, 1019 (E.D.N.Y. 1981).

The requirement that a distributor must have knowledge of the
contents of a publication before liability can be imposed for
distributing that publication is deeply rooted in the First
Amendment, made applicable to the states through the Fourteenth
Amendment. "[T]he constitutional guarantees of the freedom of
speech and of the press stand in the way of imposing" strict
liability on distributors for the contents of the reading
materials they carry. Smith v. California, 361 U.S. 147,
152-53, 80 S.Ct. 215, 218-19, 4 L.Ed.2d 205 (1959). In Smith,
the Court struck down an ordinance that imposed liability on a
bookseller for possession of an obscene book, regardless of
whether the bookseller had knowledge of the book's contents.
The Court reasoned that

Id. at 153, 80 S.Ct. at 219 (citation and footnote omitted).
Although Smith involved criminal liability, the First
Amendment's guarantees are no less relevant to the instant
action: "What a State may not constitutionally bring about by
means of a criminal statute is likewise beyond the reach of its
civil law of libel. The fear of damage awards . . . may be
markedly more inhibiting than the fear of prosecution under a
criminal statute." New York Times Co. v. Sullivan,
376 U.S. 254, 277, 84 S.Ct. 710, 724, 11 L.Ed.2d 686 (1964) (citation
omitted).

CompuServe's CIS product is in essence an electronic,
for-profit library that carries a vast number of publications
and collects usage and membership fees from its subscribers in
return for access to the publications. CompuServe and companies
like it are at the forefront of the information industry
revolution. High technology has markedly increased the speed
with which information is gathered and processed; it is now
possible for an individual with a personal computer, modem, and
telephone line to have instantaneous access to thousands of
news publications from across the United States and around the
world. While CompuServe may decline to carry a given
publication altogether, in reality, once it does decide to
carry a publication, it will have little or no editorial
control over that publication's contents. This is especially so
when CompuServe carries the publication as part of a forum that
is managed by a company unrelated to CompuServe.

With respect to the Rumorville publication, the undisputed
facts are that DFA uploads the text of Rumorville into
CompuServe's data banks and makes it available to approved CIS
subscribers instantaneously.*fn1 CompuServe has no more
editorial control over such a publication than does a public
library, book store, or newsstand, and it would be no more
feasible for CompuServe to examine every publication it carries
for potentially defamatory statements than it would be for any
other distributor to do so. "First Amendment guarantees have
long been recognized as protecting distributors of
publications. . . . Obviously, the national distributor of
hundreds of periodicals has no duty to monitor each issue of
every periodical it distributes. Such a rule would be an
impermissible burden on the First Amendment." Lerman v. Flynt
Distributing Co., 745 F.2d 123, 139 (2d Cir. 1984), cert.
denied, 471 U.S. 1054, 105 S.Ct. 2114, 85 L.Ed.2d 479 (1985);
see also Daniel v. Dow Jones & Co., 137 Misc.2d 94, 102, 520
N YS.2d 334, 340 (N.Y. Civ. Ct. 1987) (computerized database
service "is one of the modern, technologically interesting,
alternative ways the public may obtain up-to-the-minute news"
and "is entitled to the same protection as more established
means of news distribution").

Technology is rapidly transforming the information industry.
A computerized database is the functional equivalent of a more
traditional news vendor, and the inconsistent application of a
lower standard of liability to an electronic news distributor
such as CompuServe than that which is applied to a public
library, book store, or newsstand would impose an undue burden
on the free flow of information. Given the relevant First
Amendment considerations, the appropriate standard of liability
to be
applied to CompuServe is whether it knew or had reason to know
of the allegedly defamatory Rumorville statements.

Plaintiffs have not set forth any specific facts showing that
there is a genuine issue as to whether CompuServe knew or had
reason to know of Rumorville's contents. Because CompuServe, as
a news distributor, may not be held liable if it neither knew
nor had reason to know of the allegedly defamatory Rumorville
statements, summary judgment in favor of CompuServe on the
libel claim is granted.

III. Business Disparagement Claim

Plaintiffs base the claim for business disparagement of
Skuttlebut on statements published in Rumorville in April 1990.
Plaintiffs' contention is that "defendants made statements
intentionally designed to discourage its [sic] own subscribers
and others in the news business from associating with
Skuttlebut, thus disparaging Skuttlebut's business." Complaint,
¶ 20. These statements include, inter alia, the allegedly
defamatory remarks suggesting that plaintiffs inappropriately
accessed information from Rumorville "through some back door"
and describing Skuttlebut as a "new start-up scam." Blanchard
Aff., ¶¶ 5, 8.

New York courts rarely use the term "business disparagement"
and have not articulated the elements of such a claim. New
York's highest court, although not using the "business
disparagement" label, has recognized a cause of action for
tortious conduct similar to that alleged by plaintiffs. See
Ruder & Finn Inc. v. Seaboard Surety Co., 52 N.Y.2d 663,
670-71, 422 N.E.2d 518, 522, 439 N.Y.S.2d 858, 862 (1981)
("[w]here a statement impugns the basic integrity or
creditworthiness of a business, an action for defamation
lies").*fn2 New York courts have applied other labels to
similar conduct: "The tort of trade libel or injurious
falsehood consists of the knowing publication of false matter
derogatory to the plaintiff's business of a kind calculated to
prevent others from dealing with the business or otherwise
interfering with its relations with others, to its detriment."
Waste Distillation Technology, Inc. v. Blasland & Bouck
Engineers, P.C., 136 A.D.2d 633, 633, 523 N.Y.S.2d 875, 876 (2d
Dep't 1988).

Because the utterance of a disparaging statement must be
intentional in order to give rise to an unfair competition
claim based on disparagement, CompuServe may not be held liable
on plaintiffs' unfair competition claim if it did not know or
have reason to know of the Rumorville statements. As discussed
with respect to the libel claim, supra, plaintiffs have failed
to meet their burden of setting forth specific facts showing
that there is a genuine issue as to whether CompuServe had
knowledge or reason to know of the April 1990 Rumorville
statements. Summary judgment in favor of CompuServe on the
unfair competition claim is therefore granted.

V. Vicarious Liability

Plaintiffs also argue that CompuServe may be held vicariously
liable for the allegedly defamatory Rumorville statements,
based on an agency relationship between CompuServe, CCI, and
DFA. CompuServe contends that the undisputed facts demonstrate
that, at most, DFA is an independent contractor of CCI and CCI
is an independent contractor of CompuServe, so that it may not
be held vicariously liable for the statements that appeared in
Rumorville.

Based on the undisputed facts, the Court concludes that
neither CCI nor DFA should be considered an agent of
CompuServe. CompuServe, CCI, and DFA are independent of one
another. CompuServe has simply contracted with CCI for CCI to
manage the Journalism Forum; under the contract, CCI "agrees to
manage, review, create, delete, edit and otherwise control the
contents of the [Journalism Forum], in accordance with
editorial and technical standards and conventions of style as
established by CompuServe." Cameron Aff., Exhibit A. CompuServe
has thereby delegated control over the assembly of the contents
of the Journalism Forum to CCI. CompuServe's ultimate right
under the contract to remove text from its system for
noncompliance with its standards merely constitutes control
over the result of CCI's independent work. This level of
control over the Journalism Forum is insufficient to rise to
the level of an agency relationship. Similarly, the contractual
provisions calling for CompuServe to provide CCI with training
necessary to manage the Journalism Forum and to indemnify CCI
from claims resulting from information appearing in the
Journalism Forum do not give CompuServe sufficient control over
CCI and its management of the Journalism Forum to render CCI an
agent of CompuServe.

As for DFA, the original publisher of Rumorville, CompuServe
has no direct contractual relationship with DFA; DFA provides
Rumorville to the Journalism Forum under a contract with CCI.
The contract between CCI and DFA provides that "DFA accepts
total responsibility for the contents of" Rumorville; that DFA
"agrees to maintain the [Rumorville] files in a timely fashion
including uploading and merging into availability to the
members of [Rumorville]"; and that "DFA maintains total
responsibility for communicating with its members, billing them
for any membership fees and collecting same." Cameron Aff.,
Exhibit B. DFA is therefore largely independent of CompuServe
in its publication of Rumorville, and the tenuous relationship
between DFA and CompuServe is, at most, that of an independent
contractor of an independent contractor. The parties cannot be
seen as standing in any sort of agency relationship with one
another, and CompuServe may not be held liable for any of
plaintiffs' claims on a theory of vicarious liability. Cf.
McNally v. Yarnall, 764 F. Supp. 838, 852-53 (S.D.N.Y. 1991).

VI. Need for Additional Discovery

Plaintiffs also suggest, in their memorandum of law in
opposition to CompuServe's summary judgment motion, that
additional discovery is needed and should preclude the grant of
summary judgment. Fed.R.Civ.P. 56(f) provides that when the
party opposing a motion for summary judgment cannot "present by
affidavit facts essential to justify the party's opposition,
the court may refuse the application for judgment or may order
a continuance to permit . . . discovery to be had." In order to
persuade the Court to grant a request for additional discovery,
plaintiffs would have to "file an affidavit explaining (1) what
facts are sought and how they are to be obtained, (2) how those
facts are reasonably expected to create a genuine issue of
material fact, (3) what effort the affiant has made to obtain
them, and (4) why the affiant was unsuccessful in those
efforts." Hudson River Sloop Clearwater, Inc. v. Department of
the Navy, 891 F.2d 414, 422 (2d Cir. 1989) (citing Burlington
Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919,
926 (2d Cir. 1985)). The Court
may reject a request for further discovery pursuant to Rule
56(f) if no affidavit is filed or if the request is based on
pure speculation as to what would be discovered. Burlington
Coat Factory, 769 F.2d at 926-927.

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